Readers Digest Association’s planned emergence from Chatper 11 bankruptcy was temporarily derailed when British regulators rejected the settlement due to questions about an underfunded $180 million pension liability for the company’s British subsidiary.
US Federal Bankruptcy Court Judge Robert Drain gave the company “72 hours in an effort to reach a consensus with the British Pensions Regulator.”
Failure to do so may force the worldwide publishing giant to put its British subsidiary into receivership.
Prior to the developments on Monday, only the United States subsidiary had been involved in the pre-packaged bankruptcy proceeding, which is designed to cut the company’s debt load from $2.2 billion to $525 million and leave the original private equity backer, Ripplewoon Holdings, with zero equity.
The company said the British pension payout had already been approved by a pension trustee in Britain. It last hurdle was the Pensions Regulator, who rejected the plan without comment.
RDA insisted the development was “unexpected and as far as we know unprecedented.”
The company insisted that the British pensioners would get more from the company if the US wing successfully emerged from Chapter 11 than if the British division is forced to follow its Yankee counterpart into the equivalent of a bankruptcy liquidation sale.
The company said that once the British issue is dealt with, it still expects to bring the company out of bankruptcy.